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Understanding Closing Costs

Understanding Closing Costs

Closing Costs for purchases -
Closing costs vary widely based on where you buy and when you close your loan. Also, many of the closing costs can be shared between by buyers and sellers depending on what you negotiate in your contract. Therefore, I never recommend assuming your costs will be a percentage relative to your purchase price. Instead its best to get an actual estimate to know what you can expect prior to making offers.
Closing costs for refinances -
Closing costs for refinances tend to be much lower than those on purchase loans. Not only do transfer taxes typically not apply but also title and escrow fees are significantly discounted. Many people also choose to either incorporate their closing costs into their loan OR opt for a rate that offers a discount large enough to pay
Once you have submitted your mortgage application (and have a ratified purchase contract in the case of a purchase), you will receive a Loan Estimate.

The Loan Estimate will go over all anticipated fees associated with the purchase and give an estimated total of the amount due at closing. Throughout the loan process, if changes occur that impact the closing costs or payment, you will be issued an updated loan estimate. Once the loan is approved and the fees are finalized, you will receive the Closing Disclosure. The Closing Disclosure will reflect the final fees and amount you should wire into the escrow company for closing.

Here is a sample list of fees that may be included in closing costs. While all these fees might not apply it’s a good starting place to understand what you can expect. There may also be fees you incur that are not listed, often times, those fees will be for inspections incurred while completing your due diligence on a property.

Lender Fees -
Underwriting
Points
Tax Service
Flood Certification
Credit Report
Appraisal

Title and Escrow Fees -
Homeowners Title Insurance Policy (for purchases only)
Lenders Title Insurance Policy
Escrow
Notary
Endorsements
Recording Fees
Loan Document preparation

Recurring costs due at closing -
Homeowner’s Insurance
Prorated mortgage interest
Property taxes

Government Fees -
County recording fees
Transfer taxes applicable by county and city

Other Examples of Potential Fees -
Impound account reserves (tax and insurance monthly payments)
HOA transfer fees
HOA documents
Flood Insurance
Inspection fees such as termite, foundation or roof
Mortgage Insurance

Its important to have a good understanding of all the fees involved in your refinance or purchase transaction. I’m always happy to review each of these fees in greater detail and give you a sample estimate of fees you can expect to pay for your specific scenario.

Click here to view a sample: